Question 1

Do noncorporate and corporate shareholders typically have the same preference for the tax treatment of a stock redemption? Explain.

Accepted Answer

No,noncorporate and corporate shareholde

Question 2

Which one of the following statements about property distributions is false?

Accepted Answer

A) When the basis of distributed property is greater than its fair market value, a deficit may be created in E & P. 
B) When the basis of distributed property is less than its fair market value, the distributing corporation recognizes gain. 
C) When the basis of distributed property is greater than its fair market value, the distributing corporation does not recognize loss. 
D) The amount of a distribution received by a shareholder is measured by using the property's fair market value. 
E) All of the above statements are true. 
A) When the basis of distributed property is greater than its fair market value, a deficit may be created in E & P. 
B) When the basis of distributed property is less than its fair market value, the distributing corporation recognizes gain. 
C) When the basis of distributed property is greater than its fair market value, the distributing corporation does not recognize loss. 
D) The amount of a distribution received by a shareholder is measured by using the property's fair market value. 
E) All of the above statements are true.

Question 3

Lupe and Rodrigo,father and son,each own 50% of the stock outstanding of Heron Corporation (E & P of $400,000).During the current year,Heron redeems all of Lupe's shares for $250,000.The transaction cannot qualify as a complete termination redemption if:

Accepted Answer

A) Lupe received a $250,000 note receivable from Heron in the stock redemption. 
B) Lupe loaned Heron Corporation $50,000 two years following the redemption. 
C) Rodrigo continued to serve on Heron Corporation's board of directors for two years following the redemption. 
D) Three years after the redemption, Lupe inherited Rodrigo's shares in Heron as a result of his son's death. 
E) None of the above. 
A) Lupe received a $250,000 note receivable from Heron in the stock redemption. 
B) Lupe loaned Heron Corporation $50,000 two years following the redemption. 
C) Rodrigo continued to serve on Heron Corporation's board of directors for two years following the redemption. 
D) Three years after the redemption, Lupe inherited Rodrigo's shares in Heron as a result of his son's death. 
E) None of the above.

Question 4

In the current year,Warbler Corporation (E & P of $250,000) made the following property distributions to its shareholders (all corporations):
​
 
Warbler Corporation is not a member of a controlled group.As a result of the distribution:

Accepted Answer

A) The shareholders have dividend income of $200,000. 
B) The shareholders have dividend income of $260,000. 
C) Warbler has a recognized gain of $30,000 and a recognized loss of $30,000. 
D) Warbler has no recognized gain or loss. 
E) None of the above. 
A) The shareholders have dividend income of $200,000. 
B) The shareholders have dividend income of $260,000. 
C) Warbler has a recognized gain of $30,000 and a recognized loss of $30,000. 
D) Warbler has no recognized gain or loss. 
E) None of the above.

Question 5

Vireo Corporation redeemed shares from its sole shareholder pursuant to a written agreement between the parties that clearly identified the transaction as a stock redemption (and not a dividend distribution).Since the agreement is binding under state law,the shareholder will receive sale or exchange treatment with respect to the redemption.

Accepted Answer

A) True 
 B)False

Question 6

Pink Corporation declares a nontaxable dividend payable in rights to subscribe to common stock.Each right entitles the holder to purchase one share of stock for $25.One right is issued for every two shares of stock owned.Jack owns 100 shares of stock in Pink,which he purchased three years ago for $3,000.At the time of the distribution,the value of the stock is $45 per share and the value of the rights is $2 per share.Jack receives 50 rights.He exercises 25 rights and sells the remaining 25 rights three months later for $2.50 per right.

Accepted Answer

A) Jack must allocate a part of the basis of his original stock in Pink to the rights. 
B) If Jack does not allocate a part of the basis of his original stock to the rights, his basis in the new stock is zero. 
C) Sale of the rights produces ordinary income to Jack of $62.50. 
D) If Jack does not allocate a part of the basis of his original stock to the rights, his basis in the new stock is $625. 
E) None of the above. 
A) Jack must allocate a part of the basis of his original stock in Pink to the rights. 
B) If Jack does not allocate a part of the basis of his original stock to the rights, his basis in the new stock is zero. 
C) Sale of the rights produces ordinary income to Jack of $62.50. 
D) If Jack does not allocate a part of the basis of his original stock to the rights, his basis in the new stock is $625. 
E) None of the above.

Question 7

Betty's adjusted gross estate is $9 million.The death taxes and funeral and administration expenses of her estate total $1.2 million.Included in Betty's gross estate is stock in Heron Corporation,valued at $3.3 million as of the date of her death.Betty had acquired the stock six years ago at a cost of $810,000.If Heron Corporation redeems $1.2 million of Heron stock from the estate,the transaction will qualify under § 303 as a redemption to pay death taxes and receive sale or exchange treatment.

Accepted Answer

A) True 
 B)False

Question 8

​
Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.​
a.Increase
b.Decrease
c.No effect
-Charitable contribution carryforward deducted in the current year.

Accepted Answer

The answer of ​
Using the legend provided, classify each statement...

Question 9

In a property distribution,the amount of dividend income recognized by a shareholder is always reduced by the amount of liability assumed by a shareholder.

Accepted Answer

A) True 
 B)False

Question 10

Purple Corporation has accumulated E & P of $100,000 on January 1,2017.In 2017,Purple has current E & P of $130,000 (before any distribution).On December 31,2017,the corporation distributes $250,000 to its sole shareholder,Cindy (an individual).Purple Corporation's E & P as of January 1,2018 is:

Accepted Answer

A) $0. 
B) ($20,000). 
C) $100,000. 
D) $130,000. 
E) None of the above. 
A) $0. 
B) ($20,000). 
C) $100,000. 
D) $130,000. 
E) None of the above.

Question 11

Ashley,the sole shareholder of Hawk Corporation,has a stock basis of $200,000 at the beginning of the year.On July 1,she sells all of her stock to Matt for $1 million.On January 1,Hawk has accumulated E & P of $90,000 and during the year,current E & P of $160,000.Hawk makes the following cash distributions: $270,000 to Ashley on March 31 and $90,000 to Matt on December 1.How are the distributions taxed to Ashley and Matt? What is Ashley's recognized gain on the sale to Matt?

Accepted Answer

The $160,000 in current E & P is allocat

Question 12

Ten years ago,Carrie purchased 2,000 shares of common stock in Osprey Corporation for $20,000.In the current year,Carrie receives a nontaxable stock dividend of 20 shares of Osprey preferred.Values at the time of the dividend are: $8,000 for the preferred stock and $72,000 for the common.Based on this information,Carrie's basis in the stock is:

Accepted Answer

A) $20,000 in the common and $8,000 in the preferred. 
B) $2,000 in the common and $18,000 in the preferred. 
C) $18,000 in the common and $2,000 in the preferred. 
D) $19,802 in the common and $198 in the preferred. 
E) None of the above. 
A) $20,000 in the common and $8,000 in the preferred. 
B) $2,000 in the common and $18,000 in the preferred. 
C) $18,000 in the common and $2,000 in the preferred. 
D) $19,802 in the common and $198 in the preferred. 
E) None of the above.

Question 13

Six years ago,Ronald and his mom each owned 50% of the stock of Bronze Corporation.At such time,Bronze redeemed all of Ronald's stock.For the redemption year,Ronald filed the agreement required of the family attribution waiver and reported the transaction as a complete termination redemption (i.e.,sale or exchange).In the current year,the mom passed away and willed her entire stock interest in Bronze to Ronald.The inheritance of Bronze stock by Ronald is a prohibited interest for purposes of the family attribution waiver.

Accepted Answer

A) True 
 B)False

Question 14

Constructive dividends have no effect on a distributing corporation's E & P.

Accepted Answer

A) True 
 B)False

Question 15

For purposes of a partial liquidation,the termination of a business test is a subjective test that should be relied upon only after obtaining a favorable ruling from the IRS.

Accepted Answer

A) True 
 B)False

Question 16

Albatross Corporation acquired land for investment purposes in 2003 at a cost of $100,000.Albatross sold the land to Monty on December 30,2017,and did not elect out of the installment method of accounting.The selling price of the property was $400,000.Monty made a cash down payment of $50,000 on the date of sale and executed a $350,000 note,payable in seven annual installments of $50,000 each plus interest at the rate of 6% per annum.The first installment of $50,000 was due in 2018 which Monty paid,plus interest of $21,000.Discuss the effect of this sale on Albatross's taxable income and its E & P account in 2017 and 2018.

Accepted Answer

The gross profit percentage on the sale

Question 17

​
Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.​
a.Increase
b.Decrease
c.No effect
-Proceeds of life insurance received upon the death of a key employee (policy had no cash surrender value).

Accepted Answer

The answer of ​
Using the legend provided, classify each statement...

Question 18

Briefly discuss the rules related to distributions of non-cash property.

Accepted Answer

Amounts distributed as dividends in the

Question 19

Matching
Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.
a.Increase
b.Decrease
c.No effect
-Section 179 expense in second year following election.

Accepted Answer

The answer of Matching
Using the legend provided, classify each statement...

Question 20

Bristlebird Corporation (E & P of $700,000) has 3,000 shares of common stock outstanding.Juan owns 1,500 shares and his wife,Roberta,owns 1,500 shares.Juan and Roberta each have a basis of $90,000 in their Bristlebird stock.In the current year,Bristlebird Corporation redeems 1,000 shares from Juan for $250,000.With respect to the distribution in redemption of the Bristlebird stock:

Accepted Answer

A) Juan has dividend income of $250,000. 
B) Juan has dividend income of $190,000. 
C) Juan has a capital gain of $250,000. 
D) Juan has a capital gain of $190,000. 
E) None of the above. 
A) Juan has dividend income of $250,000. 
B) Juan has dividend income of $190,000. 
C) Juan has a capital gain of $250,000. 
D) Juan has a capital gain of $190,000. 
E) None of the above.

Do noncorporate and corporate shareholders typically have the same preference for the tax treatment of a stock redemption? Explain.

Which one of the following statements about property distributions is false?

Lupe and Rodrigo,father and son,each own 50% of the stock outstanding of Heron Corporation (E & P of $400,000).During the current year,Heron redeems all of Lupe's shares for $250,000.The transaction cannot qualify as a complete termination redemption if:

In the current year,Warbler Corporation (E & P of $250,000) made the following property distributions to its shareholders (all corporations): Warbler Corporation is not a member of a controlled group.As a result of the distribution:

Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017. a.Increase b.Decrease c.No effect -Charitable contribution carryforward deducted in the current year.

In a property distribution,the amount of dividend income recognized by a shareholder is always reduced by the amount of liability assumed by a shareholder.

Purple Corporation has accumulated E & P of $100,000 on January 1,2017.In 2017,Purple has current E & P of $130,000 (before any distribution).On December 31,2017,the corporation distributes $250,000 to its sole shareholder,Cindy (an individual).Purple Corporation's E & P as of January 1,2018 is:

Constructive dividends have no effect on a distributing corporation's E & P.

For purposes of a partial liquidation,the termination of a business test is a subjective test that should be relied upon only after obtaining a favorable ruling from the IRS.

Briefly discuss the rules related to distributions of non-cash property.

Matching Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2017. a.Increase b.Decrease c.No effect -Section 179 expense in second year following election.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Exam 19: Corporations: Distributions Not in Complete Liquidation

Do noncorporate and corporate shareholders typically have the same preference for the tax treatment of a stock redemption? Explain.

Which one of the following statements about property distributions is false?

Lupe and Rodrigo,father and son,each own 50% of the stock outstanding of Heron Corporation (E & P of $400,000).During the current year,Heron redeems all of Lupe's shares for $250,000.The transaction cannot qualify as a complete termination redemption if:

In the current year,Warbler Corporation (E & P of $250,000) made the following property distributions to its shareholders (all corporations): ​ Warbler Corporation is not a member of a controlled group.As a result of the distribution:

​ Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017.​ a.Increase b.Decrease c.No effect -Charitable contribution carryforward deducted in the current year.

In a property distribution,the amount of dividend income recognized by a shareholder is always reduced by the amount of liability assumed by a shareholder.

Purple Corporation has accumulated E & P of $100,000 on January 1,2017.In 2017,Purple has current E & P of $130,000 (before any distribution).On December 31,2017,the corporation distributes $250,000 to its sole shareholder,Cindy (an individual).Purple Corporation's E & P as of January 1,2018 is:

Constructive dividends have no effect on a distributing corporation's E & P.

For purposes of a partial liquidation,the termination of a business test is a subjective test that should be relied upon only after obtaining a favorable ruling from the IRS.

Briefly discuss the rules related to distributions of non-cash property.

Matching Using the legend provided, classify each statement accordingly. In all cases, assume that taxable income is being adjusted to arrive at current E & P for 2017. a.Increase b.Decrease c.No effect -Section 179 expense in second year following election.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

In the current year,Warbler Corporation (E & P of $250,000) made the following property distributions to its shareholders (all corporations): Warbler Corporation is not a member of a controlled group.As a result of the distribution:

Using the legend provided, classify each statement accordingly. In All cases, assume that taxable income is being adjusted to arrive at current E & P for 2017. a.Increase b.Decrease c.No effect -Charitable contribution carryforward deducted in the current year.